Capital Structure and Profitability of Selected Listed Non-Financial Firms in Ghana

2013 ◽  
Author(s):  
Anthony Hercules Turkson ◽  
Isaac Aggrey Fyn ◽  
Augustina Sackle Sarkey ◽  
James Kwesi Ansah
Keyword(s):  
Capital Structure ◽  
Financial Firms

Role of Credit Rating in determining Capital structure: Evidence from Non-Financial sector of Pakistan

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Shoaib Ali ◽  
Imran Yousaf ◽  
Muhammad Naveed
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Least Square ◽  
Annual Data ◽  
Leverage Ratio ◽  
Financial Decisions ◽  
Financial Firms ◽  
High Level ◽  
The Impact ◽  
The Capital Structure

This paper aims to examine the impact of external credit ratings on the financial decisions of the firms in Pakistan.  This study uses the annual data of 70 non-financial firms for the period 2012-2018. It uses ordinary least square (OLS) to estimate the impact of credit rating on capital structure. The results show that rated firm has a high level of leverage. Moreover, Profitability and tanagability are also found to be a significantly negative determinant of the capital structure, whereas, size of the firm has a significant positive relationship with the capital structure of the firm.  Besides, there exists a non-linear relationship between the credit rating and the capital structure. The rated firms have higher leverage as compared to the non-rated firms. The high and low rated firms have a low level of leverage, while mid rated firms have a higher leverage ratio. The finding of the study have practical implications for the manager; they can have easier access to the financial market by just having a credit rating no matter high or low. Policymakers must stress upon the rating agencies to keep improving themselves as their rating severs as the measure to judge the creditworthiness of the firm by both the investors and management as well.

scholarly journals Empirical Investigation of Symmetric and Asymmetric Target Adjustment Models: Capital Structure of Non-Financial Firms in Jordan

2017 ◽  
Vol 9 (3) ◽  
pp. 133 ◽  
Author(s):  
Bashar K. Abu Khalaf
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Interaction Model ◽  
Firm Characteristics ◽  
Leverage Ratio ◽  
Financial Firms ◽  
Large Size ◽  
Amman Stock Exchange ◽  
Target Leverage ◽  
The Impact

The different capital structure theories propose the possible asymmetric behavior of capital structure. Thus, this paper empirically investigates whether non-financial Jordanian firms follow symmetrical or asymmetrical adjustment model. Then, an interaction model with the size and profitability (firm characteristics) investigated the impact of low/high profit and small/large size on the adjustment of leverage towards the target leverage ratio. This paper covered the period of 14 years (2002-2015) for a total of 110 companies listed on Amman Stock Exchange (75 industrial and 35 services). Results indicate that although Jordanian firms seek a target leverage ratio, their adjustment towards that target is Asymmetrical and high profitable and large companies tend to adjust faster than low profitable and small size companies.

scholarly journals EFFECT OF CREDIT RATING ON CAPITAL STRUCTURE: A STUDY ON NON-FINANCIAL FIRMS IN PAKISTAN

2012 ◽  
Vol 12 (1) ◽  
Author(s):  
Keyword(s):  
Capital Structure ◽  
Credit Rating ◽  
Stock Exchange ◽  
Credit Ratings ◽  
Least Square ◽  
Statistical Tool ◽  
Ordinary Least Square ◽  
Optimal Capital Structure ◽  
Financial Firms ◽  
The Impact

Purpose- Aim of this study was to investigate whether the credit rating is an important determinant other than the firm's characteristic to obtain optimal capital structure focusing on the research hypothesis that the firms with higher credit along with the other factors (FTOA, ROA and Size) tend to have more debt in their capital structure of firms rated by P?CR? and Karachi Stock Exchange (KSE). Methodology/Sample- For this research, sample size of 48 observations (3 years data of 16 firms) was taken on the basis of convenience sampling. Results obtained by using Ordinary Least Square Model (OLS) as statistical tool to test the hypothesis Findings- Analysis clearly suggested that credit ratings do have an impact on firm's capital structure. It was concluded that firms with higher credit ratings along with other factors (FTOA, ROA and Size) do not tend to have more debt in their capital structure. Implications- Outcomes of this research might help investors, debtors and other stakeholders of the firms (rated by PACRA) to understand the impact of credit rating on firm's debt ratio and the overall dynamics and mechanism of capital structure.

Firm, industry, and country level determinants of capital structure: evidence from Pakistan

2016 ◽  
Vol 5 (3) ◽  
pp. 362-384 ◽  
Author(s):  
Tanveer Ahsan ◽  
Man Wang ◽  
Muhammad Azeem Qureshi
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Economic Conditions ◽  
Governance Mechanism ◽  
Short Term ◽  
Policy Makers ◽  
Content Type ◽  
Financial Firms ◽  
Country Level ◽  
Corporate Governance Mechanism

Purpose The purpose of this paper is to find out firm, industry, and country level determinants of capital structure of Pakistani listed non-financial firms. Design/methodology/approach The authors use a fixed effects panel data model over a 39 years (1972-2010) unbalanced panel data of Pakistani non-financial listed firms to determine the factors that influence capital structure of these firms. Findings The authors find that Pakistani firms prefer retained earnings to finance their business projects, and debt is easily available for experienced firms. Moreover, socio-economic collusive networks, poor corporate governance mechanism along with weak legal system provide these firms an opportunity to pass on their risk to the creditors (banks). Research limitations/implications The data set does not contain factors characterizing inter-industry heterogeneity, therefore, the authors use mean industry leverage and mean industry profitability to explore if any relationship exists between leverage of firms, and their respective industry leverage/profitability. Practical implications Pakistani non-financial firms are highly leveraged increasing their probability to face financial distress in erratic economic conditions. As such, the policy makers need to develop capital markets of Pakistan to enable a resilient corporate capital structure. Further, erratic economic conditions of Pakistan create uncertain business environment yielding short-term opportunities and to finance them Pakistani firms use short-term debt as a main financing source. The policy makers need to improve corporate governance mechanism and strengthen legal system that will go a long way to develop Pakistani capital market on sound and sustainable footing. Originality/value This is the first study that uses an extended number of variables and discovers financial behavior of firms in a bank-based economy having limited financing options, and facing erratic economic conditions.

scholarly journals Effect of Equity Financing Options on Financial Performance of Non-Financial Firms Listed at the Nairobi Securities Exchange, Kenya

2018 ◽  
Vol 5 (4) ◽  
pp. 160
Author(s):  
Benter Omollo Achieng ◽  
Willy Muturi ◽  
Joshua Wanjare
Keyword(s):  
Capital Structure ◽  
Corporate Finance ◽  
Financial Performance ◽  
Ordinary Least Squares ◽  
Negative Effects ◽  
Equity Financing ◽  
Financial Firms ◽  
Positive Effects ◽  
Retained Earnings ◽  
Positive Effect

Corporate finance managers worldwide have for a long time consistently sought to maximize shareholders’ wealth and their firm’s market value through their decisions on firm’s capital structure. However, both scholars and practitioners of corporate finance are yet to agree on the optimal mix of equity and debt that maximizes a firm’s financial performance. The purpose of this study was to examine the effects of equity financing options namely common stock (CS), retained earnings (REN) and total equity (TED) as ratios of total assets on the financial performance measured as return on assets (ROA) and return on equity (ROE) of Kenya’s listed firms. Utilizing panel econometric techniques namely pooled ordinary least squares (OLS), fixed effects (FE) and random effects (RE), the study analyzes the effects of equity variables as ratios of total assets on the financial performance of 40 non-financial firms listed at the Nairobi Securities Exchange between 2009 and 2015. The study’s empirical results show that CS ratio significantly and negatively affects ROA while REN ratio has a statistically significant and positive effect on ROA. Overall, TE ratio positively and significantly affects ROA. On the contrary, ROE is not significantly affected by the equity variables in the sample. While the non-significant effects of equity on ROE find support in Modigliani and Miller’s capital structure irrelevance theory, the positive effects of REN ratio and the negative effects of CS ratio on ROA, which are largely supported by the trade-off theory, may explain the pecking order theory’s prioritization of internal capital sources over debt and equity issuances. Thus, corporate finance managers should find a place for internal financing options particularly retained earnings to maximize equity holders’ returns on assets employed. Additionally, corporate finance managers should endeavour to minimize on the use of CS due to its negative effects on shareholder earnings on their assets. Nonetheless, a reasonable balance between CS and REN should be considered since the positive effect between TE and ROA is an appraisal for an optimum mix of equity financing options.

scholarly journals The Determinants of Capital Structure: New Evidence from Listed Companies in Vietnam

2019 ◽  
Vol 67 (6) ◽  
pp. 1587-1595
Author(s):  
Phuong Dung Thi Nguyen ◽  
Thanh Nhan Thi Do ◽  
Michael Joseph Dempsey
Keyword(s):  
Capital Structure ◽  
High Growth ◽  
Listed Companies ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Financial Firms ◽  
High Profit ◽  
Tangible Assets ◽  
New Evidence

This study examines the factors which affect the capital structure of 608 non-financial firms in Vietnam during the period 2009–2017. Our findings indicate that companies with more tangible assets prefer longer term to shorter term debts while larger companies tend to borrow more to finance their activities. Furthermore, companies with high profit and high growth in Vietnam are able to opt for alternative options for raising capital in addition to borrowing. Overall, we recommend that capital structures in Vietnamese firms can be understood within a framework of the pecking order theory. Interestingly, audit reputation is the single considered determinant that does not appear to impact on the firms’ capital structure.

scholarly journals Role of Capital Structure in Firm’s Value: A Case of Pakistani Firms

2021 ◽  
Vol 1 (2) ◽  
pp. 55-64
Author(s):  
MUHAMMAD ASIF ◽  
MUHAMMAD USMAN HAMEED ◽  
ZAINULLAH KHALIL
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Debt Financing ◽  
Financial Firms ◽  
Effect Regression ◽  
The Impact

The Most important and critical decision for a finance manager is adequate Capital structure. Modigliani and Miller had started the debate of capital structure in creating firm’s value. The research was conducted to find out the impact of capital structure and the value of the firm in Pakistan. The research was conducted on 71 non-financial firms of KSE 100 index. Using fix effect regression in the study it was found that there is significant effect of Capital structure on firm’s value but the use of debt financing had negative relationship with the firm’s value.

scholarly journals Capital Structure Shifts And Recession: An Empirical Investigation

2011 ◽  
Vol 9 (12) ◽  
pp. 13 ◽  
Author(s):  
Rakesh Duggal ◽  
Michael Craig Budden
Keyword(s):  
Capital Structure ◽  
Empirical Investigation ◽  
Font Size ◽  
Financial Firms ◽  
Dividend Cuts

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none;" class="MsoNormal"><span style="color: black; font-size: 10pt; mso-themecolor: text1;"><span style="font-family: Times New Roman;">This study investigates whether the 2007-2009 recession impacted the capital structures of U.S. corporations.<span style="mso-spacerun: yes;"> </span>Investigating all non-financial firms in the S&amp;P 500 Index, the study finds that by boosting their book equity via dividend cuts and some debt reductions, firms kept book leverage unchanged.</span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

scholarly journals Capital Structure andCorporate Governance practices. Evidence from Listed Non-Financial Firms on Nairobi Securities Exchange Kenya.

2013 ◽  
Vol 10 (2) ◽  
pp. 8-16 ◽  
Author(s):  
Mwalati Solomon Chitiavi Mwalati Solomon Chitiavi
Keyword(s):  
Capital Structure ◽  
Financial Firms ◽  
Governance Practices

scholarly journals A Survey on Capital Structure Decision of Nepalese Non-Financial Firm

Pravaha ◽  
2018 ◽  
Vol 24 (1) ◽  
pp. 196-205
Author(s):  
Shanker Dhodary
Keyword(s):  
Capital Structure ◽  
Primary Data ◽  
Line Managers ◽  
Probabilistic Sampling ◽  
Financial Firms ◽  
Descriptive Research ◽  
Statistical Measures ◽  
Maturity Structure ◽  
Financial Firm ◽  
Finance Officers

The study aims at examining the views of capital structure in Nepalese non-financial enterprises. The study is based on primary data. A descriptive research design has been adopted for the study. Different descriptive statistical measures such as minimum, maximum, percentage, average, standard deviation and coefficient of variation have been used to analyze. This study is directed towards examining the capital structure policy of Nepalese non- financial firms. The primary information required for the said purpose has been collected through the survey of opinions of board of directors, company secretary, executives, chief finance officers and other line managers through administering the well structure multi- part questionnaire. For the purpose of field survey, 90 questionnaires were distributed among the respondents located in Kathmandu using non probabilistic sampling. The survey result shows that preference toward maturity structure of borrowing varied among the Nepalese non-financial firms, and majority of Nepalese firms do not consider interest rate and practice of matching between asset and liabilities structure while they go for borrowing. As proper matching between assets and liabilities structure is required, companies should pay attention towards this aspect. Outside security analysts and comparative industry have only a minimal effect on the development of these targets. Pravaha Vol. 24, No. 1, 2018, Page: 196-205

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